The three risky C’s leaving their mark on the commercial insurance market

After a year of market-shaping events, from marijuana legalization to freak ice storms and new privacy regulations, many insurance professionals are likely welcoming the holidays with open arms. Yet, the three major risks in the Canadian market that are being watched closely by commercial insurance professionals bring some cheer with them as well.

CannabisThe advent of legalization in Canada has created a juicy marketplace that some insurers are eager to take a bite out of because of the opportunities that have opened up for commercial insurance.

“Cannabis legalization is going to greatly impact the commercial sector,” said Paul Lucarelli, senior vice president of commercial insurance for RSA Canada. “We do see with legalization that there is an opportunity for RSA to enter this market and we currently do cover risks of this nature, but generally, the high-level, federally-backed operations is where we would be most interested, and really largescale cultivators and producers of cannabis would be the area that we’d be looking for within our mid-market and specialty lines of business.”

RSA isn’t, however, looking to write cannabis businesses in the SME area right now because, according to the SVP, “We would want to have a greater level of underwriting touch to it and get more comfortable with the physical characteristics of the risk. From a retail perspective, we wouldn’t be insuring any storefront operations currently. They would be seen as outside of our appetite, but once the provincial rules and regulations for dispensaries finalize in the New Year, we’ll revisit the position. Generally, our appetite will vary from province to province, depending on who is authorized to sell cannabis.”

CatastropheWhile not all Canadians have become consumers of the marijuana market, few were left untouched by catastrophic events this year, which appear to be on the rise globally and have had a significant impact on insurers across the country. Natural disasters leave their mark on communities long after they’ve passed through, which means business interruption coverage is especially important.

“Even properties that aren’t typically impacted could be impacted from a power shortage or from being down during business hours, so a business interruption coverage then kicks in,” said Lucarelli, adding that there is a silver lining when it comes to catastrophes. “Because of these increasing occurrences, although they are unfortunate, it results in us having more data to be able to predict the impact in our models. We don’t see this issue subsiding, but from an internal data standpoint, we’re moving more toward industry-wide data as all of our competitors are doing the same. It’s less about just relying on what has happened to RSA in the past – it’s really about, what is the Canadian climate change reality like and what do we foresee that impact being going forward?”

Seemingly smaller storms can also have an impact when they strike quickly and happen in times of the year that people wouldn’t have expected in the past.

“The wind storm that we saw in May of this year, that had the same amount of call volume as Fort McMurray,” said Lucarelli. “A fairly benign, six-hour event can result, because of the concentration of population, in a volume issue as big as an unfortunate catastrophe like Fort McMurray.”

CyberThreats to insureds don’t just exist outside of a home or business, but can lurk within its walls as well as connected devices that introduce new doorways for hackers to walk through.

“Cyberattacks and breaches are occurring with increasing regularity, but the types of cyber threats are also changing. It’s not necessarily high-profile, larger organizations that are most heavily affected. It can be, and we are seeing, more of the small and medium-sized organizations that are just as likely to be hit by a cyberattack,” said Lucarelli.

On the flipside, cyber insurance is the fastest growing type of coverage that RSA is seeing in the market, revealing the wealth of opportunities that exist to provide clients with this coverage.

“The increase in high-profile cyber events has really piqued the interest of our business owners at this point, and our broker partners are becoming increasingly interested in what our offering is, especially those that specialize in cyber,” explained Lucarelli. “They would say that their client presentations have gone from, a few years ago when it was up to the broker to convince their clients of the value of cyber coverage, to now customers asking for information about cyber coverage and the conversations are being initiated by clients. That’s a real shift that we’re seeing in the marketplace.”

Business interruption comes in handy during cyber incidents as well, and complements the mitigation services and coverages offered within the cyber product. RSA also provides 24/7 access to a breach coach who can guide a business through the process of resolving a breach and, when necessary, involve the required professionals, whether it be an IT forensics team or public relations, though companies and their brokers also have to put in some effort before disaster strikes.

“It’s not just about having a product – it’s really about our brokers helping our insureds mitigate and put the mitigation practices in place to limit these losses,” said Lucarelli.